The Essence of the Manager's Job

Decision making Process:

Introduction:

First you detect a problem. Your home ceiling is in bad order. You wish not that clumsy ceiling, you want a refined and cemented and well-painted ceiling. That's a real problem. Ok. So you pick all of your tools or hire a constructor and get your ceiling anew. And, after doing so you will probably check whether its up to your expectation or not. A job well carried out.
But have you noticed you've done what exactly we call decision making process? If not time has come just to realize that.

Decision-making process (D.M.P):

A wholistic comprehensve process... Not merely selecting of alternatives. Not identifying the problem. Not merely reevaluating decisiosn effectiveness. Rather integration of all of them. DMP is an all-relevant process for all seasons and ages! Its as relevent to your personal decision about which class to bunk as it is to a billion-dollar corporate deal.

What is a Problem: A discrepency or 'gap' between an existing and a desired state of affair.

8 Step The Process:

1. Identifying the problem (watch-out for symptoms of a deeper problem, they're not the problem),

2. Identifying decision criteria (determine what's relevant in a decision)
3. Allocating Wieghts to the criteria (giving correct priority)

4. Developing Alternatives (don't you need best of the best?)

5. Analyzing Alternatives (evaluating the alternatives against step 2 & 3)

6. Selecting an alternative
7. Implementing the alternative (putting the decision into actions)

8. Evaluating Decision Effectiveness (see Part 6 of book).

How are decisions made?

We are here dealing with decisions in management functions. Decisions in management are of four types - planning, organizing, leading and controlling. When managers do these activities they're called decision makers.

There are three ways of looking at how decisions are made:

• Rationality: The foundations of rational-choice-decisions are described as when having clear, unambiguous problems, when time-pressures are low, when action against problems have known consequences and results. Remember in managerial context, decision maker keeps only in view value-maximizing of its own company.
• Bounded Rationality: Rationality is very limited in real world, at least the kind of assumptions suggested already. Managers are supposed to be making 'rational-choice-decisions'. Yet, they are bound to make limited rational decisions because of 'human capacities and abilities'. This is called bounded rationality. That is, they don't maximise them, rather satisfice.
• Intuition: Making decisions on the basis of experience, feelings, and accumulated judgment spontaneously. Organically, intuition and intellect are same, complementary rather than sui generis (as Al-Ghazali thought wrongly). Almost half of the corporate executives use to run their companies,one survey study found.

Types of Problems & Conditions in Decision Making:

Types of Problems: There are total of two major problems which managers face in approaching to a problem with DMP.

• Structured Problems: Logical, trivial, understanable, straight-forward problems which have a priori structured or defined rules, solutions or procedures. Happily, in tackling such problems a manager don't need to go through even DMP.
• Unstructured Problems: When you're having problems that are new or unusual having incomplete information, then such problems are categorised as unstructured problems. To such problems there lie no black-and-white ready-made solution. Key to them is creative bend of mind.

Who gets which?

-Low-level mangers - they face structured problems

-Upper-level managers - they deal with nonprogrammed problems.

Decision-Making Conditions: Multiplicity and diversity is everywhere, decision-making, no exceptions. Therefore, there are three conditions managers face as they make decisions:

• Certainity: A situation in which a manager can make accurate decisions because all outcomes are known.
• Risk: A position form whre estimates of outcomes can be made, only (this happens when 'doubts' are alive, but dormant).
• Uncertainity: When any probable estimated outcome seems as unlikely as another guess. Amount of information and psychological aptitude of the decision-maker are indicators of either success or complete failure. We have three choices: maximax, maximin and minimax. Again, a manger shall follow anyone of these choices based on his psychological orientation and amount of data.

Decision-Making Styles:

Directive Style: they tend to have low level tolerance for incomplete information and are highly rationalistic. (Thinker)

Analytic Style: they tend to have high level tolerance for ambiguity and their way of thinking is rationalistic. (Sensor)

Conceptual Style: Intuitively they think and keep high level acceptance for ambiguity. (Intuitor.)

Behavioral Style: They think intuitively while having low-level tolerance for ambiguity. (Feeler.)

Biases and Errors in Decision Making:

Humans are humans. Their professional decision making goes not without having a mark of their nature on it. Thus they can commit mistakes in the form of biases and trivial errors - overconfidence, sunk cost (lack of realisation that today's actions cannot rectify past's mistakes), randomness, availability, self-serving bias, selective perception (narrow-mindedness), hindsight bias etc.

Todays' World and Decision Making:

Americans feel better with Americans, Japanese with Japanese, Pakistanis with Pakistanis and so on. My question to you is you don't you open up? Understand Cultural differences. Carlos ghosn did this in Nissan in1999 as he was the first ever non-japanese in Nissan. Yet he changed many persisting traditions in the company. In Japanese culture people with old-age and long experience mostly reached at higher levels. It wasn't happening on the basis of performance, primarily. Ghosn changed this paradigm as well the tradition. But how? He was able to resolve this apparent conflictin proposition on the basis of securing respect of his employees, in the first place. Japanese who worked with him, never doubted him.